3D Printer Earnings: Are We At A Floor?

• 3D Systems Corporation DDD shares have dipped 3 percent since January 4, while Stratasys, Ltd. SSYS shares have plunged 34 percent and Voxeljet AG (ADR) VJET shares are up 7 percent.
• Citi’s Kenneth Wong maintained a Neutral rating for 3D Systems, a Buy rating for Stratasys and a Neutral-High Risk ratings for Voxeljet.
• Wong expects the 4Q setup for the 3D printing industry to be favorable.

Analyst Kenneth Wong mentioned that although the 3D printer segment remains out of favor, it has outperformed growth segments like Internet and software in 2016. Better-than-feared industry inputs have resulted in an improvement in the general outlook for the segment.

Wong expects the 4Q setup for the 3D printing industry to be favorable with good news likely to outweigh bad news.

3D Systems

Wong has a price target of $12.50 for 3D Systems. The company preannounced better-than-expected 4Q revenues of $183 million, driven by printers.

Wong believes that 3D Systems is unlikely to announce guidance for 2016 unless a new CEO is appointed and the strategic reining of the company’s product portfolio is completed. He added, “We are currently not modeling a downshift in absolute OpEx until 2H16, but we believe signs of progress would go a long way.”

Voxeljet AG

The analyst has a price target of $5 for Voxeljet. The company reaffirmed its FY15 targets of €23-€24 million, while mentioning its FY16 guidance at €28-€30million.

Wong expects the company to report a strong performance at its services business with some upside expected from the better utilization of additional capacity in Friedberg and the UK. He added, “We believe updates on traction at the Canton facility would be viewed as a positive.”

“We rate Voxeljet High Risk due to early-stage development of the commercial 3D printing industry. Voxeljet results are highly dependent on printer sales. With only 3- 4 printers sold per quarter, delays can heavily impact results. Voxeljet has a limited public financial history and we see higher risk until a consistent track record can be established,” the Citi report noted.

Stratasys

Wong has a price target of $35 for Stratasys. The company is likely to report its 4Q revenues at the low end of its guided range of $160-$175 million. Market checks reveal consistent sales trends, but a softer capital equipment market.

Management is realigning the company’s cost structure. “We believe the lower take rate coupled with a decline in job postings will keep expense light and keep EPS away from the lower end of guidance (-$0.17 to - 0.06),” Wong wrote.

The analyst expects the company’s excess capacity to weigh on its growth throughout the year putting investor focus on cost realignment. “We expect management to reveal plans to reduce the company cost structure with investors no longer paying for revenue (1.5x) and limited clarity around the growth timeline.”